Faster Payments overtook Direct Debit to become the third most-used payment type in the UK in 2023 and could become a “viable alternative” to debit card payments at point-of-sale by the end of the decade, according to UK Finance.
However, UK Finance’s head of research Adrian Buckle said it would be “highly unlikely” that Faster Payments will overtake debit card payments by the 2030s, due to consumer behaviour.
In its Payment Markets Report 2024, UK Finance reported the total number of payments made in the UK rose to 48.1 billion last year, up from 45.7 billion in 2022, with 85% of those payments made by consumers.
Debit cards remained the most popular payment method, accounting for 51% of all payments made in 2023 and are the most-used payment method among UK consumers of all ages.
Cash is the second most-frequently used payment method in the UK, with variations across age groups, and accounted for 12% of all payments made in the UK during 2023, down from 14 per cent in 2022.
UK Finance also revealed that 38% of all payments made last year were contactless, while one-third of UK adults used mobile contactless payments at least once a month.
In its forecasts to 2033, UK Finance has predicted that the continued rise of contactless payments will be one of the factors behind increased debit card payment volumes.
By 2030, UK Finance forecasts that Faster Payments/remote payments will be the second most popular payment method in the UK, followed by credit cards, then direct debit in fourth and cash in fifth.
In a media briefing, Buckle said that the growth rate of Faster Payments will be “dependent on a lot of work that has been going on in the industry”.
“There is work through Open Banking that will potentially open up the possibility to use Faster Payments more extensively at the point of sale, whether that’s for online shopping or real-world shopping. If those plans come to fruition, it is possible that Faster Payments could become a viable alternative to using a debit card for those types of shopping experiences,” Buckle said.
“In which case, we might even see a much greater increase in use of Faster Payments towards the end of this period [2033] and even a reduction in debit card use. But it is really dependent on industry activities and consumer behaviour.”
He questioned whether consumers will choose to use Open Banking, or whether they will continue to use “the debit cards they know and trust”.
The ‘Future of Payments Review’ led by former Nationwide chief executive officer Joe Garner and published in November last year, recommended Open Banking “as the route to improve the UK consumer account-to-account payment journey”.
The review also suggested that Open Banking could provide “a viable digital alternative to the card schemes”.
Asked whether it is possible Faster Payments/Open Banking payments will overtake the popularity of debit card payments by 2030-33, Buckle said that consumers need a reason to adopt new payment methods.
“That’s very much what we saw with cards. Contactless attracted people through its speed, simplicity and security. What we are missing in the jigsaw puzzle for the future is, what is going to attract consumers to changing their shopping behaviour?”
Buckle added: “I think it highly unlikely Faster Payments will overtake debit card payments by 2030, 2033. I think we’re talking much more long term. And it also doesn’t take account of the potential reaction of card providers and the card schemes and what they might do as a competitive response.”
Jana Mackintosh, managing director, payments and innovation at UK Finance and Phillip Mind, UK Finance’s director for digital technology and innovation are speaking at this year’s Open Banking Expo UK & Europe on 15-16 October. Find out more about the speaker line-up and register to attend here.
